Strategic Outsourcing at Bharti Airtel Limited

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  • Topic: Mobile phone, GSM, Bharti Airtel
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Strategic Outsourcing at Bharti Airtel Limited

Bharti Airtel Limited- the Indian telecommunications firm formerly known as Bharti Tele-Venture Limited

Akhil Gupta- Joint Managing Director of Bharti Airtel Limited

• Network Suppliers Agreement took 3 months and a quarter to finalize • Bharti’s customer base growing @ 100% per year
o Challenge to keep pace with network expansion
o PROBLEM #1 - Budgeting and the tendering process for network expansion takes up tremendous amount of management time and bandwidth. Tendering- Solicitation of vendors bids for contracts o PROBLEM #2 – Management of firms IT Capital Expenditures; Equipment purchased within a couple of years becoming obsolete for intended purchase purposes. Huge investments at waste because of unpredictable expenditures! o Need a lean and predictable cost model- if Bharti had a reliable, predictable usage- linked cost structure, then could become the lowest-cost producer of minutes

• Proposed Solution to Capital Expenditure nightmares: o Plan consisted of two outsourcing proposals-
▪ One to Bharti’s key telecom network equipment vendors, Ericsson, Nokia, and Siemens ▪ The other to Bharti’s IT equipment vendor, IBM ▪ Vendors involved worried about taking on additional risk o Sunil Mittal- Bharti’s Chairman and Managing Director gave Gupta free rein to investigate options to solve the problem.

Bharti History and Background
• Mittal founded Bharti in 1995 with $900 start-up capital. • Mittal’s Goal for Bharti has two-fold: o To take advantage of the liberalization of the Indian telecom market o To bid for a government license to operate the 1st private mobile telecom service in the Delhi area. • Mittal was an entrepreneur at the time with experience in creating and successfully managing several businesses o Bicycle Components business

o Portable Generator Import business
o Venture with Siemens to produce telephone equipment

• Existence of first eight years: Growth because there was a “Single minded devotion to the project and the industry.” Basically, there was FOCUS. o Mittal stated, “Our business is telecom and nothing else.” o Bharti- first private provider in the Delhi market o In 1998, first private provider to make a profit

o Drive for continuous expansion- Aggressively pursued acquisitions of licenses for mobile operations in other geographic regions or “Circles.” • Circles- Telecom service in India was divided into geographical areas, called circles, for the purpose of awarding mobile and fixed-line telephone licenses.

• Acquisition strategy required greater capital inflows- In 1999; Bharti sold 20% equity interest to the private equity firm Warburg Pincus. • Soon after, NY Life Insurance Fund, Asian Infrastructure Group, the International Finance Group, and SingTel, all acquired equity interest. • 2002- Bharti went public raising $172 million in IPO o Indian National Stock Exchange

o Mumbai (Bombay) Exchange
o Delphi Stock Exchange

• 2002 year-end: Bharti raised over $1 billion through FDI

• Capital Inflows financed next stage of growth
o 2001-2002: obtained mobile licenses for 15 out of India’s 23 total circles o 6 Fixed-lined licenses of the 15
o Leverage with SingTel, licenses to be 1st private telecommunication service provider in India to launch national and international...
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